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Economy in Brief

CPI Rose Slightly More Than Expected
by Tom Moeller July 16, 2004

The Consumer Price Index (CPI-U) rose 0.3% in June versus Consensus expectations for a 0.2% rise. The upside surprise was fueled by a 2.6% gain in energy prices.

Seasonally adjusted gasoline prices jumped 3.1%, about double the not seasonally adjusted rise. Even that increase was somewhat surprising given that the weekly tracking of retail gasoline prices indicated a m/m decline of 0.7%. So far in July average gasoline prices are 3.2% below the June average at $1.91 per gallon.

Core consumer prices rose a less than expected 0.1%. The shortfall was the result of no change in the prices of core consumer goods. New & used vehicle prices fell 0.1% (-3.5% y/y) and home furnishings prices rose a modest 0.1% (-0.5% y/y). Apparel prices rose 0.2% (0.5% y/y) and medical care commodities prices ticked 0.1% (2.9% Y/Y) higher.

Core service prices rose 0.2% for the second consecutive month. Shelter costs rose a modest 0.1% (2.9% y/y) and public transportation prices were unchanged after a 1.3% May decline (-0.9% y/y). Medical care services prices rose 0.4% (5.1% y/y), the strongest increase in three months.

The chained CPI which adjusts for shifts in consumer buying behavior rose 0.3%. It is similar to the PCE price deflator. The core chain price measure was unchanged.

Consumer Price Index June May Y/Y 2003 2002 2001
Total  0.3% 0.6% 3.2% 2.3% 1.6% 2.8%
 Total less Food & Energy 0.1% 0.2% 1.8% 1.5% 2.3% 2.7%
  Goods less Food & Energy 0.0% 0.1% -1.0% -2.0% -1.1% 0.3%
  Services less Energy 0.2% 0.2% 3.0% 2.9% 3.8% 3.7%
 Energy 2.6% 4.6% 17.0% 12.2% -5.8% 3.7%
 Food 0.2% 0.9% 3.8% 2.1% 1.8% 3.1%
             
Chained CPI: Total (NSA) 0.3% 0.4% 2.6% 1.9% 1.3% 2.3%
 Total less Food & Energy 0.0% -0.1% 1.4% 1.1% 1.9%  2.0%
U.S. Consumer Sentiment Edged Higher
by Tom Moeller July 16, 2004

The University of Michigan’s consumer sentiment index for mid-July edged up to 96.0 from the June reading of95.6. Consensus expectations had been for a larger gain to 97.0.

During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.

Improvement in the expectations sub-index to 90.4 followed the sharp m/m rise in June. The index of current economic conditions fell 2.0% versus June.

The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

University of Michigan Mid-July June Y/Y 2003 2002 2001
Consumer Sentiment 96.0 95.6 5.6% 87.6 89.6 89.2
   Current Conditions 104.6 106.7 2.4% 97.2 97.5 100.1
   Consumer Expectations 90.4 88.5 8.0% 81.4 84.6 82.3
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